How Do The Clients Calculate Their Maximum Borrowing Capacity?

Clients can easily calculate their maximum borrowing capacity by subtracting their net income from their expenses. It can be difficult to outline what expenses need to be calculated for clients who are unfamiliar with calculating maximum borrowing capacity. 

There is a wide range of expenses that need to be calculated, including the following:

• Debts: high-interest rates, credit cards, personal loans
• Recurring expenses: occur on a semi-regular schedule, fluctuating in price
• Fixed expenses: customary expenses that occur on a regular schedule
• Whammy expenses: unpredictable and emergency expenses
• Non-recurring expenses: occur randomly throughout the year
• Household expenses: residence upkeep, family size, groceries, medical bills, medications, etc.
• Bills: household, subscriptions, insurance, cell phones, etc.

Clients should work with a mortgage broker before making a home loan offer to verify their borrowing capacity calculations are correct and they choose a home loan option that pairs well with their current financial status and plans. It is important to keep in mind that using the total amount of maximum borrowing capacity is not always the best option and can cost more in the long run. 

Overall, a client’s salary and debts are the biggest deciding factors of borrowing capacity. Clients can increase their borrowing capacity through multiple different ways to be able to borrow more. Saving more for a larger deposit, closing credit cards, lowering high credit limits, monitoring credit histories, and making on-time debt and bill repayments. 

Budgeting all income and saving as much as a client can for a deposit can allow them to pay less money throughout their home loan.